ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is management’s analysis of our financial performance and of significant trends that may affect our future performance. The MD&A should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (the ''Annual Report on Form 10-K''). Those statements in the MD&A that are not historical in nature should be deemed forward-looking statements that are inherently uncertain. See "Forward-Looking Statements" below for a discussion of the factors that could cause actual results to differ materially from those projected in these statements.
Unless otherwise noted or the context requires otherwise, references in this report to "Delek Logistics Partners, LP," the "Partnership," “we,” “us,” or “our” or like terms, may refer to Delek Logistics Partners, LP, one or more of its consolidated subsidiaries or all of them taken as a whole. Unless otherwise noted or the context requires otherwise, references in this report to "Delek Holdings" refer collectively to Delek US Holdings, Inc. and any of its subsidiaries, other than the Partnership and its subsidiaries and its general partner.
The Partnership announces material information to the public about the Partnership, its products and services and other matters through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, the Partnership's website (www.deleklogistics.com), the investor relations section of the website (www.deleklogistics.com/overview), the news section of its website (www.deleklogistics.com/news-releases), and/or social media, including its X (formerly known as Twitter) account (@DelekLogistics). The Partnership encourages investors and others to review the information it makes public in these locations, as such information could be deemed to be material information. Please note that this list may be updated from time to time.
Forward-Looking Statements
This Annual Report on Form 10-K (including information incorporated by reference) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act. These forward-looking statements reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities. Forward-looking statements include, among other things, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the actions of members of the Organization of Petroleum Exporting Countries ("OPEC") and other leading oil producing countries (together with OPEC, "OPEC+") with respect to oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning our possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, the benefits and synergies to be obtained from our completed and any future acquisitions, including the H2O Midstream and Gravity acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,” “should,” “could,” “would,” "forecasts", “predicts,” "strategy", “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “appears,” “projects” and similar expressions, as well as statements in future , identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to:
• our substantial dependence on Delek Holdings or its assignees and their support of and respective ability to pay us under our commercial agreements;
• our future coverage, leverage, financial flexibility and growth, and our ability to improve performance and achieve distribution growth at any level or at all;
• Delek Holdings' future growth, strategic priorities, financial performance, share repurchases, crude oil supply pricing and flexibility and product distribution;
• industry dynamics, including Permian Basin growth, ownership concentration, efficiencies and takeaway capacity;
• the age and condition of our assets and operating hazards and other risks incidental to transporting, storing and gathering crude oil, intermediate and refined products, including, but not limited to, costs, penalties, regulatory or legal actions and other effects related to spills, releases and tank failures;
• changes in insurance markets impacting costs and the level and types of coverage available;
• the timing and extent of changes in commodity prices and demand for refined products, and the impact of events such as the conflicts in Ukraine and the Middle East, and the global response to such conflicts, and any future public health crisis on such demand;
• the wholesale marketing margins we are able to obtain and the number of barrels of product we are able to purchase and sell in our West Texas wholesale business;
• the shift from hydrocarbon energy sources to alternative energy sources;
• the suspension, reduction or termination of Delek Holdings' or its assignees' or third-party's obligations under our commercial agreements including the duration, fees or terms thereof;
• the ability to attract and retain key personnel;
Management's Discussion and Analysis of Financial Condition and Results of Operations
• the results of our investments in joint ventures;
• the ability to secure commercial agreements with Delek Holdings or third parties upon expiration of existing agreements;
• the possibility of inefficiencies, curtailments, or shutdowns in refinery operations or pipelines, whether due to infection in the workforce or in response to reductions in demand as a result of a public health crisis;
• disruptions due to equipment interruption or failure, or other events, including terrorism, sabotage or cyber-attacks, at our facilities, Delek Holdings’ facilities or third-party facilities on which our business is dependent;
• changes in the availability and cost of capital of debt and equity financing;
• our reliance on information technology systems in our day-to-day operations;
• changes in general economic conditions, including uncertainty regarding the timing, pace and extent of economic recovery in the United States due to governmental fiscal policy or a public health crisis;
• the effects of existing and future laws and governmental regulations, including, but not limited to, the rules and regulations promulgated by the Federal Energy Regulatory Commission ("FERC") and state commissions and those relating to environmental protection, pipeline integrity and safety as well as current and future restrictions on commercial and economic activities in response to a public health crisis;
• the timely receipt of required government approvals and permits;
• significant operational, investment or other changes required by existing or future environmental statutes and regulations, including international agreements and national or regional societal, legislation; and regulatory measures to limit or reduce greenhouse gas emissions;
• competitive conditions in our industry including capacity overbuild in areas where we operate;
• actions taken by our customers and competitors;
• the demand for crude oil, refined products and transportation and storage services;
• our ability to successfully implement our business plan;
• inability to complete growth projects on time and on budget;
• our ability to successfully complete acquisitions and integrate acquired businesses, and to achieve the anticipated benefits therefrom;
• disruptions due to acts of God, natural disasters, casualty losses, severe weather patterns, such as freezing conditions, cyber or other attacks on our electronic systems, and other matters beyond our control which might cause damage to our pipelines, terminal facilities and other assets and could impact our operating results through increased costs and/or loss of revenue;
• changes in the price of RINs could affect our results of operations;
• future decisions by OPEC+ regarding production and pricing and disputes between OPEC+ regarding such;
• changes or volatility in interest and inflation rates;
• labor relations;
• large customer defaults;
• changes in tax status and regulations;
• the effects of future litigation or environmental liabilities that are not covered by insurance; and
• other factors discussed elsewhere in this Annual Report on Form 10-K.
Many of the foregoing risks and uncertainties are, and will be, exacerbated by any worsening of the global business and economic environment. In light of these risks, uncertainties and assumptions, our actual results of operations and execution of our business strategy could differ materially from those expressed in, or implied by, the forward-looking statements, and you should not place undue reliance upon them. In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period trends. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.
In light of these risks, uncertainties and assumptions, our actual results of operations and execution of our business strategy could differ materially from those expressed in, or implied by, the forward-looking statements, and you should not place undue reliance upon them. In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period trends. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.
All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary: Management's View of Our Business and Strategic Overview
Management's View of Our Business
The Partnership provides gathering, pipeline and other transportation services primarily for crude oil and natural gas customers, storage, wholesale marketing and terminalling services primarily for intermediate and refined product customers, and water disposal and recycling services through its owned assets and joint ventures located primarily in the Permian Basin (including the Delaware sub-basin) and other select areas in the Gulf Coast region. A significant potion of our existing assets are both integral to and dependent upon the success of Delek Holdings' refining operations, as many of our assets are contracted exclusively to Delek Holdings in support of the Tyler Refinery, El Dorado Refinery and Big Spring Refinery.
Business and Economic Environment Overview
During the year ended December 31, 2025, we made significant strides in our commitment to being a full-suite crude, gas and water midstream services provider in the Permian Basin, in addition to diversifying our customer base to include more third-party customers. On May 1, 2025, we entered into a series of agreements with Delek Holdings which, among other things, allowed us to assume all of Delek Holdings’ rights and obligations to purchase crude oil under certain contracts associated with our existing Midland Gathering System.
In January 2025, the Partnership closed the Gravity Acquisition which includes integrated full-cycle water systems in the Midland Basin, in addition to water gathering, and transportation assets in the Bakken, and along with our H2O Midstream Acquisition, provides a strong opportunity for integrated crude and water services to its customers. These transactions significantly enhance our competitive position in the Midland basin and serve to further our economic separation from our sponsor and contribute to an increase in third party revenue.
As producers continue to ramp up production within the Permian Basin, the Partnership is well positioned to continue to add value through our gathering and processing services as we have expanded our dedicated crude acreage in our Midland Gathering system. Additionally, in the Delaware Basin, we are expanding our natural gas processing capabilities by constructing a new natural gas processing plant and adding AGI and sour gas processing capabilities. Currently, the gas plant is in its initial phase of operation, and we foresee it increasing throughput throughout 2026.
In June 2025, we successfully completed a debt issuance raising $700 million, enhancing our liquidity to over $1.0 billion. Our disciplined approach to cost control, coupled with a focus on margin enhancements, supported earnings before interest, taxes, depreciation and amortization ("EBITDA") growth and improved cash flow, while our capital deployment remained aligned with our strategic priorities. This strengthened financial position empowers us to advance our strategy of organic growth while also exploring attractive opportunities for bolt-on acquisitions. Our positioning allows our customers the ability to control quality and adds optionality to place barrels in a variety of markets.
As a result of these efforts, the Partnership saw a $33.8 million increase in net income during the year ended December 31, 2025, as compared to the prior year period. Our EBITDA increased $32.9 million in 2025 as compared to 2024. These increases are primarily attributable to earnings achieved by our H2O and Gravity acquisitions, partially offset by a decrease due to change in classification of certain of our commercial agreements with Delek, which meet the criteria to be classified as sales-type leases. As such, certain throughput and storage fees that were previously recorded as revenue are now recorded as interest income under sales-type lease accounting. Our gathering and processing segment saw a $52.4 million increase in segment EBITDA, largely due to the H2O Midstream and Gravity acquisitions. Our wholesale marketing and terminalling and segment and our storage and transportation segment saw deceases in segment EBITDA of $28.8 million and $22.5 million, respectively, largely due to the aforementioned sales-type lease accounting. Segment EBITDA for our investments in pipeline joint ventures increased by $29.1 million with the acquisition of the investment in Wink to Webster Holdings, LLC (the "W2W Investment") from Delek Holdings. See the “Results of Operations” section below for further discussion.
The near-term economic outlook still has some uncertainty with the introduction of widespread tariffs by the U.S., geopolitical instability and commodity market volatility. The uncertainty surrounding trade negotiations and the potential for further expansion of tariffs have contributed to increased market and commodity volatility and potential economic downturns. That said, we are well positioned to manage through an economic downturn because of built-in recessionary protections which include minimum volume commitments on throughput and dedicated acreage agreements. Additionally, the Partnership has embraced opportunities to enhance our environmental stewardship. It is expected that renewables, other than hydrocarbons, will continue to grow as a percentage of total energy consumption; however, a material reduction in the reliance on oil and gas for energy consumption is unlikely in the near term. Therefore, we expect that liquid transportation fuels will continue to be in high demand, and we expect to continue to leverage the strength of our cash flows and balance sheet in order to continue maximizing unitholder returns and the long-term prospects for return on investment.
See further discussion below in 'Other 2025 Developments' detailing the strategic initiatives the Partnership has implemented in order to position ourselves as a premier, full-service midstream provider in the Permian Basin. These actions not only enhance our standing in the market but also move to align us as an independent, largely third-party cash flow company with a robust growth profile.
See further discussion on macroeconomic factors and market trends, including the impact on 2025, in the ‘Market Trends’ section below.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Other Developments
Contractual Rate Adjustments to Keep Pace with Inflation
On July 1, 2025, the tariffs on certain of our FERC regulated pipelines and the throughput fees and storage fees under certain of our agreements with Delek Holdings and third parties that are subject to adjustments using FERC indexing increased 2.0%. Under certain of our agreements with Delek Holdings and third parties, the fees that are subject to adjustments using the consumer price index increased 2.6% and the fees that are subject to adjustments using the producer price index increased approximately 1.4%. These adjustments allow us to maintain compliance with FERC regulations as well as to ensure that our results are reflective of current market conditions.
2033 Notes
On June 30, 2025, the Partnership sold $700.0 million in aggregate principal amount of 7.375% senior notes due 2033 (the "2033 Notes") at par. Net proceeds were used to repay a portion of the outstanding borrowing under the DKL Revolving Facility.
Delek Permian Gathering Dropdown
On May 1, 2025, Delek Holdings transferred the Delek Permian Gathering purchasing and blending activities to the Partnership (the "DPG Dropdown”). In connection with the DPG Dropdown, the Partnership will assume all of Delek Holdings’ rights and obligations to purchase crude oil under certain contracts associated with the Partnership’s existing Midland Gathering System. Total consideration included the cancellation of $58.8 million in existing receivables owed by Delek Holdings.
Agreements with Delek Holdings
On May 1, 2025, the Partnership entered into an agreement to terminate, in its entirety, the East Texas Marketing Agreement effective as of January 1, 2026.
On May 1, 2025, in connection with the DPG Dropdown, the Partnership amended and restated a throughput agreement with Delek Holdings for the El Dorado rail facility (the “Throughput Agreement”), which includes a minimum volume commitment for refined products until the termination of the Throughput Agreement, which occurred at the closing of the El Dorado Purchase (as defined below). Additionally, on May 1, 2025, in connection with the DPG Dropdown, the Partnership and Delek Holdings, entered into an asset purchase agreement (the “El Dorado Purchase Agreement”), whereby Delek Holdings will purchase the related El Dorado rail facility assets from the Partnership for cash consideration of $25.0 million (the “El Dorado Purchase”). The El Dorado Purchase closed effective January 1, 2026.
On January 30, 2026, the Partnership entered into asset purchase agreements with Delek Holdings (collectively, the “Intercompany Agreements”). Pursuant to these agreements, the Partnership agreed to sell a Tyler refinery tank to Delek Holdings for total consideration of $19.0 million (the “Tyler Tank Sale”) and to sell El Dorado tank and terminal assets to Delek Holdings for total consideration of $66.0 million (the “El Dorado Terminal Sale”). The Tyler Tank Sale and the El Dorado Terminal Sale are expected to close on April 1, 2026 and October 1, 2027, respectively, in each case subject to the satisfaction of customary closing conditions.
Under the terms of the Intercompany Agreements, the consideration for these transactions may be received in a combination of cash and equity, with up to $20.0 million of the aggregate consideration payable through the return of Partnership common units. In addition, pursuant to the Intercompany Agreements, Delek Holdings will waive Omnibus fees for an aggregate of $4.0 million during the first two quarters of 2026.
Omnibus Agreement
On May 1, 2025, we entered into an amended and restated Omnibus Agreement with Delek Holdings that provides for an increase in the Administrative Fee (as defined therein), which will be phased in over the two years beginning July 1, 2025 and a binding obligation for both parties to enter into transition services agreements in the event of a change in control.
Unit Repurchase
On February 24, 2025, the Partnership and Delek Holdings entered into a Common Unit Purchase Agreement (the “Common Unit Purchase Agreement”) whereby the Partnership may repurchase common units from time to time from Delek Holdings in one or more transactions for an aggregate purchase price of up to $150.0 million through December 31, 2026 (each such repurchase, a “Repurchase”). During the year ended December 31, 2025, 243,075 common units were repurchased from Delek Holdings and cancelled at the time of the transaction for a total of $10.0 million. No common units were repurchased for the year ended December 31, 2024. As of December 31, 2025, there was $140.0 million of authorization remaining under the Common Unit Repurchase Agreement.
Gravity Acquisition
On January 2, 2025, we acquired Gravity and related to water disposal and recycling operations in the Permian Basin and the Bakken for total consideration of $300.8 million. The purchase price was comprised of $209.3 million in cash and 2,175,209 of common units. This transaction further enhances our position as full service (crude, natural gas and water) provider in the Permian basin. The acquisition is synergistic to our recent acquisition of H2O Midstream and supplements our integrated crude and produced water gathering and disposal offering in the Midland Basin.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Segment Overview
We review operating results in four reportable segments: (i) gathering and processing; (ii) wholesale marketing and terminalling; (iii) storage and transportation; and (iv) investments in pipeline joint ventures. Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each reportable segment based on the segment EBITDA, except for the investments in pipeline joint ventures segment, which is measured based on net income. Segment reporting is discussed in more detail in Note 14 to our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Gathering and Processing
The operational assets in our gathering and processing segment consist of our pipeline assets, Midland Gathering Assets, Midland Water Gathering Assets and Delaware Gathering Assets. The Midland Gathering Assets support our crude oil gathering activities which primarily serve Delek Holdings refining needs throughout the Permian Basin. The Midland Water Gathering Assets support our water disposal and recycling operations primarily in the Midland Basin in Texas. The Delaware Gathering Assets support our crude oil and natural gas gathering, treatment, acid gas injection, processing and transportation businesses, including the operations at Libby 1 and Libby 2 gas processing plants, as well as water disposal and recycling operations, located in the Delaware Basin of New Mexico. While we do not take ownership of gas that is gathered, we sell the processed gas at a market price which we remit to the producer, net of our fees. Therefore, we are not directly exposed to changes in commodity prices with respect to these operations. Finally, our gathering and processing assets are integrated with our pipeline assets, which we use to transport gathered crude oil as well as provide other crude oil, intermediate and refined products transportation mainly in support of Delek Holdings' refining operations in Tyler, Texas, El Dorado, Arkansas and Big Spring, Texas, as well as to certain third parties. In providing these services, we do not take ownership of the refined products or crude oil that we transport. The combination of these operational assets provides a comprehensive, integrated midstream service offering to producers and customers.
Wholesale Marketing and Terminalling
Our wholesale marketing and terminalling segment provides wholesale marketing and terminalling services to Delek Holdings’ refining operations and to independent third parties from whom we receive fees for marketing, transporting, storing and terminalling refined products and to whom we wholesale market refined products. In providing certain of these services, we take ownership of the products and are therefore exposed to market risks related to the volatility of commodity and refined product prices in our West Texas operations, which depend on many factors, including demand and supply of refined products in the West Texas market, the timing of refined product deliveries and downtime at refineries in the surrounding area.
Storage and Transportation
The operational assets in our storage and transportation segment consist of tanks, offloading facilities, trucks and ancillary assets, which provide crude oil, intermediate and refined products transportation and storage services primarily in support of Delek Holdings' refining operations in Tyler, Texas, El Dorado, Arkansas and Big Spring, Texas. Additionally, the assets in this segment provide crude oil transportation services to certain third parties. In providing these services, we do not take ownership of the products or crude oil that we transport or store. Therefore, we are not directly exposed to changes in commodity prices with respect to this operating segment.
Investments in Pipeline Joint Ventures
The Partnership owns a portion of four joint ventures (accounted for as equity method investments) that have constructed separate crude oil pipeline systems and related ancillary assets primarily in the Permian Basin and Gulf Coast regions and with strategic connections to Cushing, Midland and connections from Wink, Texas to Webster, Texas and other key exchange points, which provide crude oil and refined product pipeline transportation to third parties and subsidiaries of Delek Holdings.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Strategic Overview
Long-Term Strategic Objectives
The Partnership’s Long-Term Strategic Objectives have been focused on providing a competitive yield and growing our distribution while maintaining healthy coverage and leverage ratios. To that end, we are focused on growing our asset base through a slew of accretive growth opportunities we are seeing in our areas of operation. We are supplementing our organic growth opportunities by accretive bolt-on acquisitions which enhance our full suite services offering to our customers. A secondary benefit of growing our contribution of third-party cash flows is to continue to increase our economic separation from our sponsor Delek Holdings and to progress deconsolidation.
2025 Strategic Focus Areas
In service to these overarching Long-Term Strategic Objectives, as we began 2025, we prioritized the following Strategic Focus Areas :
I. Achieve Strong Cash Flow Growth
II. Pursue Attractive Expansion Opportunities
III. Engage in Mutually Beneficial Transactions with Delek Holdings
IV. Optimize Our Existing Assets and Expand Our Customer Base
V. Enhance our Commitment to Sustainability and Minimize our Carbon Emissions
We continue to be focused on growth opportunities in the Permian Basin given our advantageous location in the Midland and the Delaware Basins. We believe that opportunities exist in crude, natural gas and water which will continue to enhance our gathering and processing segment.
The Partnership prioritizes safe and reliable operation of its assets to maintain financial stability and growth. We have successfully avoided lost time injuries for four years, demonstrating our strong safety protocols and adherence to regulations. This commitment protects employees, assets, and operations, minimizing financial losses and maintaining stakeholder trust.
Additionally, we have prioritized reducing our leverage ratio, providing us with more financial flexibility to pursue opportunities and expand operations. By reducing our leverage and maintaining a strong financial position, we are better equipped to navigate challenges that may arise. This financial stability also allows us to seize emerging opportunities that align with our strategic goals, ensuring that we can continue to deliver value to our unitholders.
2025 Strategic Scorecard
Description of Strategic Success
Achieve Strong Cash Flow Growth
Pursue Attractive Expansion Opportunities
Engage in Mutually Beneficial Transactions with Delek Holdings
Optimize Our Existing Assets and Expand Our Customer Base
Completion of debt offering, increasing our liquidity to over $1.0 billion
DPG Dropdown
Acquisition of Gravity
Repurchase of common units from Delek Holdings
Began initial phase of operations of the natural gas processing plant expansion
Executed agreements with Delek Holdings to further our economic separation and increase third-party revenue
Looking Forward: 2026 Strategic Focus Areas
We continue to believe that our strategic focus areas are the right ones to support our long-term objectives. As part of our ongoing commitment to operational excellence, we consistently review and refine our risk and return evaluation processes, maintaining a clear focus on our overarching Long-Term Strategic Objectives and our goal of long-term operational sustainability. The continued separation from our parent, growth in third-party cash flows, and improved asset quality at the Partnership are opening multiple growth opportunities. We are well positioned to build on the strong momentum established in 2025 as we move into 2026. With this in mind, our 2026 Strategic Focus Areas are as follows:
Management's Discussion and Analysis of Financial Condition and Results of Operations
• Achieve Strong Cash Flow Growth. Building on the transformational progress made in 2025, the Partnership expects continued cash flow growth in 2026 driven by the ramp up at the Libby gas processing plant and the ongoing completion of the sour gas gathering and acid gas injection capabilities. The combined crude and water strategy in the Midland basin and the full-suite strategy in the Delaware Basin will be expanded through the completion of the sour gas handling, treating and acid gas injection infrastructure. Delek Logistics is set to be one of the few midstream companies to have a comprehensive sour gas solution to enable incremental crude and natural gas production in Delaware Basin.
• Pursue Attractive Expansion Opportunities. Continue to evaluate and pursue opportunities to grow our business through several organic growth opportunities and bolt-on acquisitions The partnership continues to pursue several attractive organic growth opportunities enabled by its advantageous position in the prolific Permian Basin. The gas plant expansion and addition of AGI and sour gas processing capabilities are enabling several additional growth opportunities for the Partnership in the Delaware Basin. In the Midland Basin combined crude and water offering is appealing for our customers and brings additional growth opportunities to our system. Delek logistics will also continue to look for attractive bolt-on acquisitions which are accretive to its free cash flow, EBITDA and leverage profiles.
• Engage in Mutually Beneficial Transactions with Delek Holdings. A key tenet of the Partnership's strategy is to continue to increase its economic separation from Delek Holdings and increase the contribution of third-party cash flows in its overall profile. We will continue to evaluate our commercial agreements with Delek Holdings to engage in mutually beneficial negotiations to create incremental value for both ourselves and our sponsor.
• Optimize Our Existing Assets and Expand Our Customer Base. We will continue to enhance the profitability of our existing assets by adding incremental throughput volumes, improving operating efficiencies and increasing system-wide utilization. Additionally, we are seeking opportunities to further diversify our customer base by increasing third-party throughput volumes utilizing certain of our existing systems and expanding our existing asset portfolio to service more third-party customers.
• Enhance Our Commitment to Sustainability and Minimize our Carbon Emissions. Continue to look for ways to grow our business whilst staying conscious of and minimizing the negative environmental impact, while also seeking opportunities to invest in innovative technologies that will reduce our carbon emissions as we achieve our growth objectives and sustainably improve unitholder returns. We expect to achieve this objective by pursuing investments that offer clear value propositions and sustainable returns, with a focus on innovative solutions that support both our growth and environmental responsibility.
How We Evaluate Our Operations
We use a variety of financial and operating metrics to analyze our segment performance. These metrics are significant factors in assessing our operating results and profitability and include:
■ volumes (including pipeline throughput and terminal volumes)
■ operating and maintenance expenses
■ cost of materials and other
■ EBITDA and distributable cash flow (as such terms are defined below)
■ EBITDA of joint ventures
Volumes
The amount of revenue we generate primarily depends on the volumes of crude oil and refined products that we handle in our pipeline, transportation, terminalling, storage and marketing operations. These volumes are primarily affected by the supply of and demand for crude oil, intermediate and refined products in the markets served directly or indirectly by our assets. Although Delek Holdings has committed to minimum volumes under certain of the commercial agreements, as described above, our results of operations will be impacted by:
• Delek Holdings’ utilization of our assets in excess of its minimum volume commitments;
• our ability to identify and execute acquisitions and organic expansion projects and capture incremental volume increases from Delek Holdings or third parties;
• our ability to increase throughput volumes at our refined products terminals and provide additional ancillary services at those terminals;
• our ability to identify and serve new customers in our marketing and trucking operations; and
• our ability to make connections to third-party facilities and pipelines.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Operating and Maintenance Expenses
We seek to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses include the costs associated with the operation of owned terminals and pipelines and terminalling expenses at third-party locations, excluding depreciation and amortization. These costs primarily include outside services, allocated employee costs, repairs and maintenance costs and energy and utility costs. Operating expenses related to the wholesale business are excluded from cost of sales because they primarily relate to costs associated with selling the products through our wholesale business. These expenses generally remain relatively stable across broad ranges of throughput volumes, but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of said expenses. Additionally, compliance with federal, state and local laws and regulations relating to the protection of the environment, health and safety may require us to incur additional expenditures. We will seek to manage our maintenance expenditures on our pipelines and terminals by scheduling maintenance over time to avoid significant variability in our maintenance expenditures and minimize their impact on our cash flow.
Cost of Materials and Other
These costs include:
(i) all costs of purchased refined products in our wholesale marketing and terminalling segment, as well as additives and related transportation of such products;
(ii) costs associated with the operation of our trucking assets, which primarily include allocated employee costs and other costs related to fuel, truck leases and repairs and maintenance;
(iii) the cost of pipeline capacity leased from any third parties; and
Financing
The Partnership anticipates paying a cash distribution to its unitholders at a distribution rate of $1.125 per unit for the quarter ended December 31, 2025 ($4.50 per unit on an annualized basis). Our Partnership Agreement requires that the Partnership distribute all of its available cash (as defined in the Partnership Agreement) to its unitholders quarterly. As a result, the Partnership expects to fund future capital expenditures primarily from operating cash flows, borrowings under our revolving credit facility and any potential future issuances of equity and debt securities. See Note 11 to the accompanying consolidated financial statements for a discussion of historic cash distributions.
How We Evaluate Our Investments in Pipeline Joint Ventures
We make strategic investments in pipeline joint ventures generally when it provides an economic benefit in terms of pipeline access we can use for our existing or future customers and when we expect a rate of return that meets our internal investment criteria. Our existing investments in pipeline joint ventures all provide a combination of strategic benefit and return on investment. The strategic benefit for each is described below:
• The RIO Pipeline is positioned in the Delaware Basin and benefits from drilling activity in the area, while also offering producers and shippers connections to Midland, Texas takeaway pipelines;
• The Caddo Pipeline provides crude oil logistics connectivity for shippers from Longview, Texas area to Shreveport, Louisiana area;
• The Red River Pipeline provides crude oil transportation and optionality from Cushing, Oklahoma to Longview, Texas area and connectivity to our Caddo JV along with the Partnership's Paline pipeline for access to Gulf Coast markets. It also has additional expansion optionality; and
• The W2W Pipeline is positioned in the Permian Basin with origin points from Wink to Midland and delivery points at multiple Houston, Texas area locations.
Market Trends
Fluctuations in crude oil, natural gas and NGL prices and the prices of related refined and other hydrocarbon products impact operations in the midstream energy sector. For example, the prices of each of these products have the ability to influence drilling activity in many basins and the amounts of capital spending that crude oil exploration and production companies incur to support future growth. Exploration and production activities have a direct impact on volumes transported through our gathering assets in the geologic basins in which we operate. Additionally, the demand for hydrocarbon-based refined products and related crack spreads significantly impact production decisions of our refining customers and likewise throughputs on our pipelines and other logistics assets. Finally, fluctuations in demand and commodity prices for refined products, as well as the value attributable to RINs, directly impacts our wholesale marketing operations, where we are subject to short-term commodity price fluctuations at the rack. Most of the logistics services we provide (including transportation, gathering and processing services) are subject to long-term fee-based contracts with minimum volume commitments or long-term dedicated acreage agreements which mitigate most of our short-term financial risk to price and demand volatility. However, sustained depressed demand/prices over the longer term could not only curb exploration and production expansion opportunities under our agreements, but it could also impact our customers' willingness or ability to renew commercial agreements or result in liquidity or credit constraints that could impact our longer-term relationship with them.
Management's Discussion and Analysis of Financial Condition and Results of Operations
That said, despite the recent crude price softness, we are seeing higher volumes in our crude gathering business. Also, our recent expansion of our gas processing capabilities has improved both our customer and geographic diversification, which lowers concentration risk in those areas, in addition to adding service offerings to our portfolio. Furthermore, our dedicated acreage agreements provide significant growth opportunities in strong economic conditions (e.g., high demand/high commodity prices) without incremental customer acquisition cost. Given all of these factors, we believe that we continue to be strategically positioned, even in tougher market conditions, to sustain positive operating results and cash flows and to continue developing profitable growth projects that are needed to support future distribution growth.
The charts on the following page provide historical commodity pricing statistics for crude oil, refined product and natural gas.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations
Non-GAAP Measures
Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our financial information presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"). These financial and operational non-GAAP measures include:
• EBITDA - calculated as net income before net interest expense, income tax expense, depreciation, amortization and proportional interest, taxes, depreciation and amortization of equity method investments.
• Distributable cash flow - calculated as net cash flow from operating activities adjusted for changes in assets and liabilities, maintenance capital expenditures net of reimbursements, sales-type lease receipts, net of income recognized and other adjustments not expected to settle in cash. The Partnership believes this is an appropriate reflection of a liquidity measure by which users of its financial statements can assess its ability to generate cash.
EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
• our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
• the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
• our ability to incur and service debt and fund capital expenditures; and
• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We believe that the presentation of EBITDA and distributable cash flow provide information useful to investors in assessing our financial condition and results of operations. EBITDA and distributable cash flow should not be considered alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and distributable cash flow have important limitations as analytical tools, because they exclude some, but not all, items that affect net income and net cash provided by operating activities. Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in our industry, our definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility. See below for a reconciliation of EBITDA and distributable cash flow to their most directly comparable GAAP financial measures.
Non-GAAP Reconciliations
The following table provides a reconciliation of EBITDA and distributable cash flow (which are defined above) to the most directly comparable GAAP measure, or net income and net cash from operating activities, respectively.
Reconciliation of net income to EBITDA (in thousands)
Year Ended December 31,
Net income
Add:
Income tax expense
Depreciation and amortization
Proportional interest, taxes, depreciation and amortization from equity-method investments
Amortization of marketing contract intangible
Interest expense, net
EBITDA
Management's Discussion and Analysis of Financial Condition and Results of Operations
Reconciliation of net cash from operating activities to distributable cash flow (in thousands)
Year Ended December 31,
Net cash provided by operating activities
Changes in assets and liabilities
Distributions from equity method investments in investing activities
Non-cash lease expense
Regulatory and sustaining capital expenditures not distributable (1)
Reimbursement from Delek Holdings for capital expenditures (2)
Sales-type lease receipts, net of income recognized
Accretion
Deferred income taxes
Gain on disposal of assets
Distributable cash flow
(1) Regulatory and sustaining capital expenditures represent cash expenditures (including for the addition or improvement to, or the replacement of, our capital assets, and for the acquisition of existing, or the construction or development of new, capital assets) made to maintain our long-term operating income or operating capacity. Examples include expenditures for the repair, refurbishment and replacement of pipelines and terminals, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations.
(2) Reimbursement from Delek Holdings for capital expenditures represents amounts for certain capital expenditures reimbursable to us from Delek Holdings pursuant to the terms of the Omnibus Agreement (as defined in Note 4 to our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K).
Management's Discussion and Analysis of Financial Condition and Results of Operations
Summary of Financial and Other Information
A discussion and analysis of the factors contributing to our results of operations is presented below. The financial statements, together with the following information, are intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance.
The following table provides summary financial data (in thousands, except unit and per unit amounts):
Summary Statement of Operations Data (1)
Year Ended December 31,
Net revenues:
Gathering and Processing
Wholesale marketing and terminalling
Storage and transportation
Total
Cost of materials and other
Operating expenses (excluding depreciation and amortization presented below)
General and administrative expenses
Depreciation and amortization
Other operating income, net
Operating income
Interest income
Interest expense
Income from equity method investments
Other income, net
Total non-operating expenses, net
Income before income tax expense
Income tax expense
Net income
Comprehensive income
Less: Preferred unitholder's interest in net income
Net income attributable to limited partners
EBITDA (2)
Net income per limited partner unit:
Basic
Diluted
Weighted average limited partner units outstanding:
Basic
Diluted
(1) This information is presented at a summary level for your reference. See the Consolidated Statements of Income and Comprehensive Income included in item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more details regarding our results of operations.
(2) For a definition of EBITDA see "Non-GAAP Measures" above.
We report operating results in four reportable segments:
• Gathering and Processing
• Wholesale Marketing and Terminalling
• Storage and Transportation
• Investments in Pipeline Joint Ventures
Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each of its reportable segments based on the segment EBITDA.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Consolidated Results of Operations - Comparison of the Year Ended December 31, 2025 versus the Year Ended December 31, 2024
Net Revenues
Net revenues increased by $72.7 million, or 7.7%, in the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily driven by the following:
• incremental revenue associated with the operations of Gravity and H2O Midstream of $90.1 million and $41.0 million, respectively.
This increase was partially offset by the following:
• decreased revenue due to recording certain throughput fees as interest income under sales-type lease accounting, whereas these fees were recognized as revenue during part of the prior year period;
• decrease of $12.1 million due to the assignment of the Big Spring Refinery marketing agreement to Delek Holdings in the third quarter of 2024; and
• decreased revenue of $5.6 million in our West Texas marketing operations primarily driven by decrease in average sales prices per gallon, partially offset by increase in volumes sold and an increase in RINs revenue.
Cost of Materials and Other
Cost of materials and other increased by $25.6 million, or 5.3%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by the following:
• incremental costs associated with the operations of Gravity and H2O Midstream of $15.9 million and $3.0 million, respectively;
• an increase of $11.2 million associated with the DPG dropdown which occurred on May 1, 2025; and
• partially offset by decreased costs of materials and other of $7.2 million in our West Texas marketing operations primarily driven by decrease in average cost per gallon, partially offset by increase in volumes sold.
Operating Expenses
Operating expenses increased by $45.6 million, or 37.2%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by the following:
• incremental costs associated with the operations of Gravity and H2O Midstream of $31.0 million and $10.6 million, respectively.
General and Administrative Expenses
General and administrative expenses decreased by $7.3 million, or 20.3%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by following:
• decrease in outside services.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Depreciation and Amortization
Depreciation and amortization increased by $29.2 million, or 30.3%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by the following:
• increase of $22.2 million associated with additional fixed asset base from the Gravity and H2O Midstream Acquisitions;
• increase of $8.0 million associated with the gas plant expansion;
• increase of $5.3 million due to additional finance leases; and
• partially offset by a $5.9 million decrease as a result of sales-type leases entered into during the third quarter of 2024.
Other operating income, net
Other operating income, net decreased by $0.5 million, or 55.4%, in the year ended December 31, 2025, compared to the year ended December 31, 2024.
Interest Income
Interest income increased by $64.7 million, or 135.4%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by income from certain of our commercial agreements with Delek Holdings that met the criteria to be accounted for as sales-type leases during the third quarter of 2024.
Interest Expense
Interest expense increased by $28.3 million, or 18.8%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by
• increased interest due to the issuance of the $700 million senior note during the second quarter 2025;
• partially offset by a decrease in interest on our outstanding revolver due to a decreased average balance; and
• decreased interest due to the pay off of a term loan during 2024.
Results from Equity Method Investments
Income from equity method investments increased by $18.5 million, or 42.7%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following:
• the acquisition of the W2W Investment on August 5, 2024, which contributed incremental income of $32.4 million during the period; and
• partially offset by a $14.0 million decrease in income from our investments in our other joint ventures.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Operating Segments
Gathering and Processing Segment
The following table and discussion present the results of operations and certain operating statistics of the gathering and processing segment for the years ended December 31, 2025 and 2024.
Gathering and Processing
Year Ended December 31,
Net revenues
Cost of materials and other
Operating expenses (excluding depreciation and amortization)
Segment EBITDA
Throughputs (bpd (1) )
Year Ended December 31,
El Dorado Assets:
Crude pipelines (non-gathered)
Refined products pipelines to Enterprise Systems
El Dorado Gathering System
East Texas Crude Logistics System
Midland Gathering System
Plains Connection System
Delaware Gathering Assets Volumes
Year Ended December 31,
Natural Gas Gathering and Processing (Mcfd (2) )
Crude Oil Gathering (bpd (1) )
Water Disposal and Recycling (bpd (1) )
Midland Water Gathering System Volumes (3)
Year Ended December 31,
Water Disposal and Recycling (bpd (1) )
(1) bpd - average barrels per day.
(2) Mcfd - average thousand cubic feet per day.
(3) Consists of volumes of H2O Midstream and Gravity. 2024 H2O Midstream volumes are from September 11, 2024 through December 31, 2024. Gravity volumes are from January 2, 2025, to December 31, 2025.
Operational Comparison of the Year Ended December 31, 2025 versus the Year Ended December 31, 2024
Net Revenues
Net revenues for the gathering and processing segment increased by $133.4 million, or 36.6%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following:
• an increase in revenue associated with the Gravity operations of $90.1 million which began on January 2, 2025;
• an increase in revenue associated with the H2O Midstream operations of $41.0 million which began in September 2024; and
• partially offset by a decrease due to recording certain throughput fees as interest income under sales-type lease accounting, whereas these fees were recognized as revenue during part of the prior year period.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Cost of Materials and Other
Cost of materials and other for the gathering and processing segment increased by $36.2 million, or 46.9%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, driven primarily by the following:
• incremental costs associated with Gravity and H2O Midstream operations of $15.9 million and $3.0 million, respectively; and
• an increase of $11.2 million associated with the DPG dropdown which occurred on May 1, 2025.
Operating Expenses
Operating expenses for the gathering and processing segment increased by $47.9 million, or 59.6%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by the following:
• incremental costs associated with the Gravity and H2O Midstream operations of $31.0 million and $10.6 million, respectively.
EBITDA
EBITDA increased by $52.4 million, or 25.3%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by the following:
• incremental EBITDA of $42.6 million and $26.7 million associated with the operations of Gravity and H2O Midstream, respectively; and
• partially offset by a decrease due to recording certain throughput fees as interest income under sales-type lease accounting in the current period.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Wholesale Marketing and Terminalling Segment
The table and discussion below present the results of operations and certain operating statistics of the wholesale marketing and terminalling segment for the years ended December 31, 2025 and 2024:
Wholesale Marketing and Terminalling
Year Ended December 31,
Net revenues
Cost of materials and other
Operating expenses (excluding depreciation and amortization)
Segment EBITDA
Operating Information
Year Ended December 31,
East Texas - Tyler Refinery sales volumes (average bpd) (1)
Big Spring marketing throughputs (average bpd) (2)
West Texas marketing throughputs (average bpd)
West Texas marketing gross margin per barrel
Terminalling throughputs (average bpd) (3)
(1) Excludes jet fuel and petroleum coke.
(2) Marketing agreement terminated on August 5, 2024, upon assignment to Delek Holdings.
(3) Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas terminals, our El Dorado and North Little Rock, Arkansas terminals and our Memphis and Nashville, Tennessee terminals.
Operational Comparison of the Year Ended December 31, 2025 versus the Year Ended December 31, 2024
Net Revenues
Net revenues for the wholesale marketing and terminalling segment decreased by $33.9 million, or 7.5%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by the following:
• decreased revenue of $5.6 million in our West Texas marketing operations primarily driven by decrease in average sales prices per gallon, partially offset by increase in volumes sold and an increase in RINs revenue:
◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.21 and $0.16 per gallon, respectively;
◦ the average volumes of diesel sold increased by 6.7 million and the average volumes of gasoline sold increased by 2.2 million gallons; and
◦ RINs revenue increased $3.7 million due to increased RINs prices.
• decrease due to recording certain throughput fees as interest income under sales-type lease accounting, whereas these fees were recognized as revenue prior to lease commencement in prior year period; and
• decrease of $12.1 million due to the assignment of the Big Spring refinery marketing agreement to Delek Holdings in the third quarter of 2024.
The following charts show summaries of the average sales prices per gallon of gasoline and diesel and refined products volume impacting our West Texas operations for the years ended December 31, 2025 and 2024.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Cost of Materials and Other
Cost of materials and other for the wholesale marketing and terminalling segment decreased by $6.9 million, or 2.0% , in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by the following:
• decreased costs of materials and other of $7.2 million in our West Texas marketing operations primarily driven by decrease in average cost per gallon, partially offset by a net increase in volumes of diesel sold:
◦ the average cost per gallon of gasoline and diesel sold decreased by $0.18 per gallon and $0.17 per gallon, respectively; and
◦ the average volumes of gasoline and diesel sold increased by 6.7 million gallons and 2.2 million gallons, respectively.
The following chart shows a summary of the average cost per gallon of gasoline and diesel purchased in our West Texas operations for the years ended December 31, 2025 and 2024. Refer to the Refined Products Volume - Gallons chart above for a summary of volumes impacting our West Texas operations.
Operating Expenses
Operating expenses for the wholesale marketing and terminalling segment decreased by $5.5 million or 36.8%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, driven primarily by a decrease in outside service costs.
Management's Discussion and Analysis of Financial Condition and Results of Operations
EBITDA
EBITDA decreased by $28.8 million, or 31.4%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily driven by the following:
• lower revenue related to sales-type lease accounting;
• lower revenue due to the assignment of the Big Spring refinery marketing agreement to Delek Holdings; and
• partially offset by a $0.24 per barrel increase in wholesale margins.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Storage and Transportation Segment
The table and discussion below present the results of operations and certain operating statistics of the storage and transportation segment for the years ended December 31, 2025 and 2024:
Storage and Transportation
Year Ended December 31,
Net revenues
Cost of materials and other
Operating expenses (excluding depreciation and amortization)
Segment EBITDA
Operational Comparison of the Year Ended December 31, 2025 versus the Year Ended December 31, 2024
Net Revenues
Net revenues for the storage and transportation segment decreased by $26.8 million, or 21.5%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the treatment of certain storage fees, which were accounted for as interest income under sales-type lease rules in the current year, while for most of the prior year, such fees had been recognized as revenue.
Cost of Materials and Other
Cost of materials and other for the storage and transportation segment decreased by $3.7 million, or 6.5%, in the year ended December 31, 2025, compared to the year ended December 31, 2024.
Operating Expenses
Operating expenses for the storage and transportation segment increased by $0.1 million, or 0.3%, in the year ended December 31, 2025, compared to the year ended December 31, 2024.
EBITDA
EBITDA decreased by $22.5 million, or 46.5%, in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to a decrease in revenue related to sales-type lease accounting.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Investments in Pipeline Joint Ventures Segment
The Investments in Pipeline Joint Ventures segment relates to strategic Joint Venture investments, accounted for as equity method investments, to support the Delek Holdings operations in terms of offering connection to takeaway pipelines, alternative crude supply sources and flow of high-quality crude oil to the Delek Holdings refining system. As a result, Delek Holdings is a major shipper and customer on certain of the Joint Venture pipelines, with minimum volume commitment ("MVC") agreements, which cushion the Joint Venture entities during periods of low activity. The other Joint Venture owners are usually major shippers on the pipelines resulting in a majority of the revenue of the Joint Venture entities coming from MVC agreements with related entities.
Investments in pipeline joint ventures segment include the Partnership's joint ventures investments described in Note 13 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Refer to Consolidated Results of Operations above for details and discussion of the investments in pipeline joint ventures segment for the year ended December 31, 2025.
Liquidity and Capital Resources
Sources of Capital
We consider the following when assessing our liquidity and capital resources:
(i) cash generated from operations;
(iv) potential issuance of additional debt securities; and
(ii) borrowings under our revolving credit facility;
(v) potential sale of assets.
(iii) potential issuance of additional equity;
At December 31, 2025, our total liquidity amounted to $949.1 million comprised of $938.2 million in unused credit commitments under our third-party revolving credit facility (as discussed in Note 10 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K), and $10.9 million in cash and cash equivalents. Historically, we have generated adequate cash from operations to fund ongoing working capital requirements, pay quarterly cash distributions and operational capital expenditures, and we expect the same to continue in the foreseeable future. Other funding sources, including the issuance of additional debt securities, have been utilized to fund growth capital projects such as dropdowns and other acquisitions. In addition, we have historically been able to source funding at rates that reflect market conditions, our financial position and our credit ratings. We continue to monitor market conditions, our financial position and our credit ratings and expect future funding sources to be at rates that are sustainable and profitable for the Partnership. However, there can be no assurances regarding the availability of any future financings or additional credit facilities or whether such financings or additional credit facilities can be made available on terms that are acceptable to us. We believe we have sufficient financial resources from the above sources to meet our funding requirements in the next 12 months, including working capital requirements, quarterly cash distributions and capital expenditures. Nevertheless, our ability to working capital requirements, to service our debt obligations, to fund planned capital expenditures, or to pay distributions will depend upon future operating performance, which will be affected by prevailing economic conditions in the oil industry and other financial and business factors, including crude oil prices, some of which are beyond our control. We continuously review our liquidity and capital resources. If market conditions were to change, for instance due to a significant in crude oil prices, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be reduced. Additionally, it could cause the rating agencies to lower our credit ratings. There are no ratings triggers that would accelerate the maturity of any borrowings under our debt agreements.
Cash Distributions
On January 26, 2026, the board of directors of our general partner declared a distribution of 1.125 per common unit (the "Distribution"), which equates to an estimated amount of approximately $60.2 million per quarter, or approximately $240.8 million per year, based on the number of common units outstanding as of December 31, 2025. The Distribution was paid on February 12, 2026, to common unitholders of record on February 5, 2026, and represents a 1.8% increase over the fourth quarter 2024 distribution. This increase in the distribution is consistent with our intent to maintain an attractive distribution growth profile over the long term. Although our Partnership Agreement requires that we distribute all of our available cash each quarter, we do not otherwise have a legal obligation to distribute any particular amount per common unit.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The table below summarizes the quarterly distributions related to our quarterly financial results:
Quarter Ended
Total Quarterly Distribution Per Limited Partner Unit
Total Cash Distribution (in thousands)
March 31, 2024
June 30, 2024
September 30, 2024
December 31, 2024
March 31, 2025
June 30, 2025
September 30, 2025
December 31, 2025
Unit Repurchase
On February 24, 2025, the Partnership and Delek Holdings entered into a Common Unit Purchase Agreement whereby the Partnership may repurchase common units from time to time from Delek Holdings in one or more transactions for an aggregate purchase price of up to $150.0 million through December 31, 2026 (each such repurchase, a “Repurchase”).The Partnership may fund Repurchases using cash on hand or borrowings under its existing credit facility, subject to compliance with applicable covenants. During the year ended December 31, 2025, 243,075 common units were repurchased from Delek Holdings and cancelled at the time of the transaction for a total of $10.0 million. No common units were repurchased for the year ended December 31, 2024. As of December 31, 2025, there was $140.0 million of authorization remaining under the Common Unit Repurchase Agreement.
Cash Flows
The following table sets forth a summary of our consolidated cash flows for the year ended December 31, 2025, and 2024 (in thousands):
Year Ended December 31,
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Operating Activities
Net cash provided by operating activities increased by $30.8 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The cash receipts from customer activities increased by $81.2 million and cash payments to suppliers and for allocations to Delek Holdings for salaries decreased by $23.7 million. These increases were partially offset by a $18.0 million decrease in cash dividends received from equity method investments, as well as a $56.2 million increase in cash paid for debt interest.
Investing Activities
Net cash used in investing activities increased by $59.6 million during the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to a increase of $138.7 million and $9.7 million in purchases of property, plant and equipment and intangibles, respectively, primarily associated with growth projects in our gathering and processing segment. Also contributing to this increase was a decrease in proceeds from sale of property, plant and equipment of $6.2 million compared to the prior year. Partially offsetting the increase in cash used was a decrease of $83.9 million related to asset purchases from Delek Holdings in prior year, as well as an increase in distributions received from equity method investments of $11.3 million. Also, the Partnership executed the Gravity Acquisition for $181.2 million in the current year, as compared to H2O Acquisition in the prior year for $182.5 million.
Financing Activities
Net cash provided by financing activities increased by $32.7 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily driven by an increase in net proceeds on term loans of $172.3 million, a decrease in net payments on our revolving credit facility of $121.6 million. Additionally contributing to this increase was a $70.8 million decrease related to redemption of preferred units in prior year in connection with H2O Acquisition, a $6.2 million decrease in payments on other financing arrangements, and a decrease in deferred financing costs paid of $7.4 million.
Partially offsetting the increase were a decrease of $297.9 million due to proceeds received from the equity issuances in October and March 2024, an increase in distributions paid of $33.4 million and a decrease of $10.0 million due to unit repurchases from Delek Holdings in the current period.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Debt Overview
As of December 31, 2025, we had total indebtedness of $2,361.9 million. The increase of $476.5 million in our long-term debt balance compared to the balance at December 31, 2024, resulted from additional borrowings under our 2033 Notes, partially offset by the paydown of the revolving facility during the year ended December 31, 2025. As of December 31, 2025, our total indebtedness consisted of:
• An aggregate principal amount of $211.9 million under the DKL Revolving Facility, due on October 13, 2027, with an average borrowing rate of 6.58%.
• An aggregate principal amount of $400.0 million, under the 2028 Notes (7.125% senior notes), due in 2028, with an effective interest rate of 7.37%.
• An aggregate principal amount of $1,050.0 million, under the 2029 Notes (8.625% senior notes), due in 2029, with an effective interest rate of 8.80%.
• An aggregate principal amount of $700.0 million, under the 2033 Notes (7.375% senior notes), due in 2033, with an effective interest rate of 7.63%.
See Note 10 to our consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a complete discussion of our third-party indebtedness.
Agreements Governing Certain Indebtedness of Delek Holdings
Please read Item 1A. "Risk Factors—Risks Relating to Our Business—Delek Holdings’ level of indebtedness, the terms of its borrowings and any future credit ratings could adversely affect our ability to grow our business, our ability to make cash distributions to our unitholders and our credit profile. Our current and future credit ratings may also be affected by Delek Holdings' level of indebtedness and financial performance and credit ratings.”
Capital Spending
A key component of our long-term strategy is our capital expenditure program, which includes strategic consideration and planning for the timing and extent of regulatory maintenance, sustaining maintenance, and growth capital projects. These categories are described below:
• Regulatory maintenance projects in the gathering and processing segment are those expenditures expected to be spent on certain of our pipelines to maintain their operational integrity pursuant to applicable environmental and other regulatory requirements. Regulatory projects in the wholesale marketing and terminalling segment relate to scheduled maintenance and improvements on our terminalling tanks and racks at certain of our terminals in order to maintain environmental and other regulatory compliance. These expenditures have historically been and will continue to be financed through cash generated from operations.
• Sustaining capital expenditures represent capitalizable expenditures for the addition or improvement to, or the replacement of, our capital assets, and for the acquisition of existing, or the construction or development of new, capital assets made to maintain our long-term operating income or operating capacity. Examples of sustaining capital expenditures are expenditures for the repair, refurbishment and replacement of pipelines, tanks and terminals, to maintain equipment reliability, integrity and safety and to maintain compliance with environmental laws and regulations. Delek Holdings has agreed to reimburse us with respect to certain assets it has transferred to us pursuant to the terms of the Omnibus Agreement (as defined in Note 4 to our accompanying consolidated financial statements). When not provided for under reimbursement agreements, such activities are generally funded by cash generated from operations.
• Growth projects include those projects that do not fall into one of the two categories above, and could include committed expansion projects under contracts with customers as well as other incremental growth projects, but are generally expected to produce incremental cash flows in accordance with our internal return on invested capital policy. Depending on the magnitude, funding for such projects may include cash generated from operations, borrowings under existing credit facilities, or issuances of additional debt or equity securities.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following table summarizes our actual capital expenditures, including any material capital expenditure payments made or forecasted to be made in advance of receipt of goods and materials, for the year ended December 31, 2025:
(in thousands)
Full Year 2026 Forecast
Year Ended December 31, 2025 (1)
Gathering and Processing
Regulatory
Sustaining
Growth
Gathering and Processing Segment Total
Wholesale Marketing and Terminalling
Regulatory
Sustaining
Growth
Wholesale Marketing and Terminalling Segment Total
Storage and Transportation
Regulatory
Sustaining
Growth
Storage and Transportation Segment Total
Total Capital Spending
(1) Amounts exclude capitalized interest and internal labor costs totaling $22.2 million, which consist of $21.7 million in our gathering and processing segment, $0.1 million in our wholesale marketing and terminalling segment, and $0.4 million in our storage and transportation segment.
The amount of our capital expenditure forecast is subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects. For example, we may experience increases in the cost of and/or timing to obtain necessary equipment required for our continued compliance with government regulations or to complete improvement projects. Additionally, the scope and cost of employee or contractor labor expense related to installation of that equipment could increase from our projections.
Long-term Cash Requirements
Information regarding our known contractual obligations of the types described below, as of December 31, 2025, is set forth in the following table (in thousands):
<1 Year
1-3 Years
3-5 Years
>5 Years
Total
Long term debt and notes payable
Interest (1)
Finance lease obligations
Operating lease commitments (2)
Total
(1) Includes expected interest payments on debt balances outstanding under the DKL Credit Facility and the 2028, 2029 and 2033 Notes at December 31, 2025. Floating interest rate debt is calculated using rates in effect on December 31, 2025.
(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of December 31, 2025.
We also have other non-current liabilities pertaining to environmental liabilities and asset retirement obligations. With the exception of amounts classified as current, there is uncertainty as to the timing of future cash flows related to these obligations. As such, we have excluded the future cash flows from the contractual commitments table above. See additional information on asset retirement obligations and environmental liabilities in Notes 2 and 15, respectively, to our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Other Cash Requirements
Our other cash requirements consisted of operating activities and cash distributions to unitholders. Operating activities included cash outflows related to payments to suppliers for crude and other materials and payments for services. Refer to the Cash Flow section for our operating activities spend in 2025. While many of the expenses related to the operating activities are variable in nature, some of the expenditures can be somewhat fixed in the short-term due to forward planning on our level of activity. Refer to Cash Distributions section for cash distributions made in 2025 and planned distributions for 2026. Refer to the capital spending section for our capital expenditures for 2025 and our planned capital expenditures for 2026.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements through the date of the filing of this Annual Report on Form 10-K.
Critical Accounting Estimates
Critical Accounting Estimates
The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our business activities. We prepare our consolidated financial statements in conformity with GAAP, and in the process of applying these principles, we must make judgments, assumptions and estimates based on the best available information at the time. To aid a reader's understanding, management has identified our critical accounting estimates. These estimates are considered critical because they are both most important to the portrayal of our financial condition and results, and require our most difficult, subjective or complex judgments. Often they require judgments and estimation about matters which are inherently uncertain and involve measuring at a specific point in time, events which are continuous in nature. Actual results may differ based on the accuracy of the information utilized and subsequent events, some over which we may have little or no control.
Leases
When accounting for leases, we evaluate any new or modified leases to determine their classification. This classification depends on several factors, including the estimated lease term and the fair value of the leased assets. Estimating the lease term, including potential renewals or terminations, is crucial in lease accounting as it affects the recognition and measurement of lease assets and liabilities. Management must consider factors like economic incentives, strategic importance, and significant leasehold improvements. This estimation impacts lease payments, expense recognition, amortization schedules, and interest expenses. Significant assumptions used to estimate the leased assets’ fair value include market information for comparable assets and cost estimates to replace the service capacity of an asset. For newly classified sales-type leases, the net investment in the lease is recorded at the estimated fair value of the underlying leased assets.
Leases must be separated into lease and non-lease components if the components are distinct and can be accounted for separately. If there is no clear allocation between lease and service components, we may estimate the fair value of the service component based on historical costs or market benchmarks.
Business Combinations
We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date. Any excess or deficiency of the purchase consideration when compared to the fair value of the net tangible assets acquired, if any, is recorded as goodwill or gain from a bargain purchase. The fair value of assets and liabilities as of the acquisition date are often estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an appropriate discount rate; the cost approach, which requires estimates of replacement costs and depreciation and obsolescence estimates; and the market approach which uses market data and adjusts for entity-specific differences. We use all available information to make these fair value determinations and engage third-party consultants for valuation assistance. The estimates used in determining fair values are based on assumptions believed to be reasonable but which are inherently uncertain. Accordingly, actual results may differ materially from the projected results used to determine fair value.
New Accounting Pronouncements
See Note 2 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a discussion of new accounting pronouncements applicable to us.
Quantitative and Qualitative Disclosures about Market Risk
